If life were a 1950s sitcom, college graduates would zoom out of school, get a job, buy a house, buy a car and get married. But these days, student loans are just one of many reason debtors under 30 are staying far away from the housing and auto markets. That, and life isn’t a sitcom. A new report from the Federal Reserve Bank of New York shows that this age group could be a drag on the economy by the very fact that they aren’t participating in it.
Because younger people aren’t able to join in the fun of buying homes and cars, and instead are stuck with low credit scores, reports the bank’s Liberty Street Economics blog. A third of borrowers are in repayment delinquency as of the end of 2012, making those people a lot less likely to spend big and boots the economy.
“Now, for the first time in at least 10 years, 30-year-olds with no history of student loans are more likely to have home-secured debt than those with a history of student loans,” wrote the authors of the data analysis.
This is surprising because in the past, it held true that the more educated a person was, the more likely it was for them to have higher incomes and thus, spend some of that income on buying a home. But now that student debt has taken off, and there aren’t perhaps as many jobs floating around out there with nice fat salaries, this isn’t the case anymore.
If things keep going this way, even more of the under 30 age group could be in debt: Back in 2003, 25% of 25-year-olds had student debt. That number has ballooned to 43% of the same age group, with the total debt balance growing by 91% in that time period, from $10,649 to $20,326.
Young Student Loan Borrowers Retreat from Housing and Auto Markets [Liberty Street Economics]